fibonacci and gann applications in financial markets

241 Pages·2007·7.73 MB·English

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Fibonacci and Gann Applications in Financial Markets
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FIBONACCI AND GANN
APPLICATIONS IN FINANCIAL
MARKETS
Practical Applications of Natural and Synthetic Ratios in
Technical Analysis
George Alexander MacLean
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ISBN-13 978-0-470-01217-8 (HB)
ISBN-10 0-470-01217-X (HB)
Typeset in 10.5 on 13 pt Times by TechBooks,New Delhi,India.
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Contents
Preface ix
1 Introduction to and History of the Fibonacci Sequence 1
2 Application to Financial Market Analysis 9
3 Other Applications of the Fibonacci Retracements and Extension 27
4 Charting and Difficulties:A Historical Perspective 41
5 Common Errors in Application of Fibonacci Retracements
and Extension 55
6 Application and Common Errors in Fibonacci Fanlines 75
7 Application and Common Errors in Fibonacci Timelines 103
8 Total Analysis – Pulling All the Skills and Techniques Together 127
9 Gann,The Misunderstood Analysis 145
10 Other Interesting Studies Using Synthetic Ratios 173
11 Conclusion 193
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vi Contents
Appendix 1 Data Problems 203
Appendix 2 Glossary of Common Terms 215
Bibliography 221
Index 223
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For Angus and Jenny for all the skills and encouragement and to the Great,the
Good and the Gurus for the knowledge
Cuimhnichibh air na daoine bho’n d’thainig sibh
(Gaelic proverb)
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Acknowledgements
Thanks are due to Equis International,www.equis.com,a wholly owned subsidiary
of Reuters PLC,for allowing the use of the MetaStock charting system for produc-
tion of the charts in this publication. Without this charting program the book would
be incomprehensible.
A very special thank you to all concerned with the publication of this title,espe-
cially those leading me by the hand at John Wiley & Sons. Writing this book was a
daunting task and the support from editorial, production and marketing staff has
been exceptional.
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Preface
Technical analysis is not a difficult subject for study, but it does suffer from a bad
press from time to time. It attracts strong personalities,as it is a very small pond and
strong characters tend to stand out more and get heavy coverage in the media; we
can suffer from the bad press by having far too many technicians saying they fore-
casted various key corrections in the past. These boasts have to be taken with a
pinch of salt. Publicity for technical analysis in the media is a good thing as techni-
cal analysts are not shy and tend not to hide under bushels. However,within our own
community the real stars are the quiet ones who do sterling work and research day
in,day out with little or no acknowledgement.
These are the experienced analysts who take time to dispense their accumulated
knowledge of market analysis and strive to further the bounds of technical educa-
tion and study. Market understanding has fallen out of favour in recent years as
traders shrink the timeframes necessary for a profitable trade. However, that was
fine in the bull market times, but is much more difficult in choppy bearish ones.
Anyone can catch the trend from simply looking at a screen, but it takes a trained
eye to spot when an asset price is running out of steam and indeed looking risky.
It is in such situations that the skills of a good technical analyst come to the fore.
In the last 20 years the study of technical analysis has become more formalised. In
the past, charting and interpretation skills were passed on from individual to indi-
vidual or perhaps even picked up from the plethora of business biography books
available. However, this is not an ideal situation and a more formal approach is
needed. It has been with the networking of analysts regionally and globally that has
seen the development of training courses, seminars and even television training. It
is to this corpus of information that this book hopes to add.
When I started out as a trainee technical analyst I was never allowed to act on any
of my analyses until I had proved myself with a professional qualification in technical
analysis, so my learning was bookish and dry and suffered from lack of practical